OZ Minerals Ltd. (OZL.AU) said Tuesday it received a fresh proposal from China Minmetals Nonferrous Metals Co. that would see the Chinese group acquire most of the embattled miner's assets but not Prominent Hill.

The Australian government last week blocked Minmetals' A$2.6 billion takeover offer for OZ on the grounds that Prominent Hill is in a military zone in South Australia state.

"OZ Minerals has received an alternative incomplete proposal from Minmetals which, when completed, will result in Minmetals acquiring all of OZ Minerals' assets except for Prominent Hill, Martabe and the company's portfolio of listed assets," OZ said in a statement.

A new Minmetals offer excluding Prominent Hill will be a fresh test of the Australian government's attitude to a surge of investment by Chinese government-backed entities in the nation's key mining sector, most notably Aluminum Corp. of China's US$19.5 billion investment in Rio Tinto Ltd. (RTP).

OZ has A$1.1 billion in debt due Tuesday and said it expects negotiations with lenders on an extension "will be completed satisfactorily having regard to the proposal".

The Melbourne-based miner said it will make a definitive announcement on refinancing negotiations before the commencement of trading Wednesday and will try to make a definitive announcement on the new Minmetals proposal within the same timeframe.

The new proposal from Minmetals involves the purchase of assets rather than a takeover offer and OZ Executive General Manager Business Support Bruce Loveday said it would see the miner continue to trade as a listed entity.

"We think if this transaction completes there is very definitively a very vibrant existence in the future for a somewhat smaller OZ Minerals," he said.

Loveday said the Minmetals deal would provide a "complete solution" to OZ's refinancing issues and the miner would have some cash left over.

"Some of the proceeds would be used to deal with OZ Minerals' debt situation and the residual amount would be cash available to the company," he said.

"The value of OZ minerals in reduced form going forward therefore would be based on Prominent Hill, Martabe, the listed assets and the net cash position."

Minmetals confirmed it has made an incomplete offer to OZ that excludes Prominent Hill, Martabe and OZ's investments in listed entities.

"Minmetals believes it will bring stability to the operations which it wants to buy and brings greater certainty to OZ Minerals employees," the Chinese group said in a statement.

Parallel to the Minmetals offer, OZ has been carrying out a sales process for its Martabe and Golden Grove assets.

Loveday said Martabe had been left out of the revised proposal in part because it was of little interest to Minmetals and in part because of advanced negotiations over the sale of the mine to a third party.

"The sale process is fairly well advanced and it was essentially carved out to enable that to complete in the event that for whatever reason this transaction ran into some obstacles," he said.

OZ Minerals had been seeking an extension from its lenders to Sep. 15, but this related to the closing date of the previous Minmetals offer, and the miner isn't saying what date it is now seeking an extension until.

Loveday also declined to comment on whether OZ has received any expressions of interest in Prominent Hill since the government rejected the Minmetals proposal, with BHP Billiton Ltd. (BHP.AU) seen by some analysts as a potential buyer of the mine.

-By Alex Wilson, Dow Jones Newswires; 61-3-9292 2094; alex.wilson@dowjones.com
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